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What to do About Apple and Fraud Friendly Manufacturing in China?

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Former banking regulator and white collar criminologist Bill Black gives an unvarnished view of the behavior of Apple and other technology companies in dealing with suppliers in China. He does not buy the idea that the US is powerless to do anything about work condition in China and provides some concrete suggestions.


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31 comments

  1. MyLessThanPrimeBeef

    Let’s put those suggestions to use.

    There is another thing we can do. We can raise our awareness and express our grateful appreciation for the contributions slaves everywhere throughout history have made, some of those are still today visible (the pyramids in Central America), functional (Roman aqueducts) and earning foreign reserves (the Great Wall) by erecting a universal memorial to all slaves in the past 5,000 years.

    1. James

      Or we can simply stop buying the products of global capitalism. Relax, it’ll be easier than you might first imagine, what with the now open robbery going on in the global economy these days. Strange, you’d think that the capitalist elite over-class that dreamed up such a brilliant scheme would be smarter than to kill off their own customer base. Strangely, they’re not. What their final end game may be is still anyone’s guess, but we do know now that a peaceful truce with happiness and well-being for most (never mind all) sure ain’t it.

      Global capitalism is now an out of control, all encompassing inferno that will only be extinguished after it consumes every last bit of living fuel available, which for planet earth and its inhabitants, ain’t so good. The Beast foretold of old is alive, well, and most of all HUNGRY in our midst. And that snarling bastard ain’t going back in its cage until the humans that created it have been “relieved of” their folly. That’s the movie epic for the 21st century, and much to Hollywood’s chagrin, it’s showing everywhere and the tickets for admission are free, although you must agree to be part of the cast.

      Oh, but for a box of popcorn and a seat in the audience! Sorry everyone, but this one’s been scripted as a reality epic – all the rage these days. An epic disaster movie on an unprecedented scale and WE’RE ALL IN IT! Who could ask for anything more?

      1. LeonovaBalletRusse

        James, not to mention how we have been screwed into poverty through a frenzy of *planned obsolescence* for decades, keeping us running like gerbils on a wheel, and all for *the next best thing* in gadgetry, PLUS we must bear the costs *externalized* by the Fat Cats in perpetuity.

        It’s a hell-bound train. Let’s stop it!

  2. Alright Jack

    I really dislike this constant appeal to people´s individual responsibility. Consumer boycotts might put pressure on individual companies and the life’s of some sweatshop workers may be improved, but it will never improve the labour rights of the entire workforce. Exercising consumer power in fact actually disempowers the workers themselves as their rights are decided even more externally rather than via labour organizing and unions. These consumer boycotts are also only effective against companies that rely very much on their brand (Nike/Apple).

    And green standards/ratings may not hurt, but obviously aren’t the end of it all. Most of the time it’s just a way for rich consumers to pay off this guilty conscious and allowing them to pretend they are doing everything they can. Organic/Fair Trade labels never achieve a higher market-share of higher than 5% (perhaps 10 in specific niches as coffee). And I really do not think it is the consumer’s responsibility to be informed on all this and acting on it. Heck, I consider myself to be much more informed than your average consumer, and I am totally clueless on the supply chain and social-environmental impact of the products I buy.

    So anyway, it always seemed to me that the US and other Western nations had (and still has to a lesser extent) to improve social and environmental standards, but did exactly the opposite through institutions as the WTO, IMF and the WB. In the last 30 years they had all the power in the world to prop up the ILO etc, but instead we got a Reagan and a Thatcher in the 80s, breaking down labour in favour of (finance) capital first at home and then exporting this neoliberal revolution to the rest of the world. The IMF and WB have been exacerbating a race-to-the-bottom all over the world, coercing nations to be ‘competitive’ and lowering/removing regulations and standards in the third world. All to support their own multinationals and investors, but they have been creating their own downfall.

    1. Lafayette

      but it will never improve the labour rights of the entire workforce

      Belonging to unions will. But that is sooooooo 1950s …

      Until, of course, you might need one. Then, where are they?

      Gonzo!

      Unions – use ‘em or lose ‘em. Think you don’t need one? Think harder …

      1. James

        Unions have been busted before, they’ll be busted again, if they ever come into existence again in the first place that is.

        Unions, yes. Against management? No. Against capitalism in general? Yes. It will happen of its own accord without any personal/organizational effort of any kind. It will TRULY be a PEOPLE’S UPRISING and it will be a TSUNAMI of OVERWHELMING FORCE.

        The current order? Laughable in their hubris. Soon to join the detritus of history. Swept out to sea like so much Fukushima radioactive dust.

        1. Lafayette

          Unions have been busted before, they’ll be busted again

          Enough of the victimization. Only if we let them be busted. The past is no prediction of the future.

          Every American has the right to belong to a union. See here.

          So if we, the sheeple, insist then it will happen. Presuming we get off our duffs and militate for action, rather than bitching-in-a-blog.

          What the opposition depends upon most is our own apathy, which prisons us in a inactive alternative.

          On the matter of human rights, consult the Universal Declaration of Human Rights. This document was a seminal work based, in part, on our own Bill of Rights. The United Nations Universal Declaration was established in the late 1940s, with Eleanor Roosevelt as a sponsor and one of the original nine drafters of the document.

          But, if one investigates closely they will see that not all Human Rights are included in our Bill of Rights, which is much shorter. Though it too was seminal work in its time when adopted by Congress in 1789 … has it kept up with the times?

          Are we never going to realize the monumental work necessary to bring Human Rights to the same standard of the Universal Declaration established six decades ago?

    2. Yves Smith Post author

      You don’t get it, do you? Labor organizing in China, where people go to terrible prisons for that?

      Consumer boycotts do work. You seem not to be old enough to remember. They helped farm workers in the 1960s (subsequent developments undid that). And farm products are a commodity. Branded consumer products are easier to boycott and the makers spend a fortune on marketing. They don’t want their pet brand image tarnished. And people don’t need smart phones. Even though people love their tech toys, they don’t NEED them.

      1. James

        Yves,

        I would argue that while consumer boycotts might well work against brands, they don’t work against industries or anything broader than that. The true beauty of global consumer capitalism is that it gradually (and none too subtly) tightens the noose around consumers’ necks to the point where there’s first no realistic option left, and then very soon afterward, no option left whatsoever. The classic frog boiling alive by small degrees metaphor. Trouble is, it’s no mere metaphor in this case. WE ARE being slowly boiled alive.

        Purely symbolic displays are all well and nice in the early on, but as any battle hardened veteran knows all too well, they’re little more than the hors d’oeuvres (thank god for Google!) for the main course.

        Mark my words, crony capitalism will meet it’s ultimate demise by the same means that all other totalitarian regimes meet their’s: complete mass refusal to meet its terms across the board. There can be no negotiation with totalitarian regimes. Don’t be fooled by the thin veneer of “liberal democracy” that global capitalism is anything other than what it is. Quite to the contrary, it is pure evil incarnate.

      2. LeonovaBalletRusse

        Yves, not that I like Google, but I remember when Motorola was the BEST, and I had Motorola *portable phones* that provided all anyone NEEDED, and it the most consistently functional way. I dare Google to bring Motorola cell-phone manufacturing back to the U.S.A., if only to spite Steve Jobs and his imperial verdict.

        NOBODY, but nobody NEEDS an iPhone or any *smartphone*. It’s true purpose was to make the laptop and e-mail obsolete, to leave generations crippled with arthritis after the age of 30.

        1. LeonovaBalletRusse

          Actually, Yves, wouldn’t it be best if our Corporate *Deciders* had to observe the Law of the Land in the U.S.A. everywhere in the world in which they operate, if they want the privilege of being U.S. Corporations? This was the case decades ago, when it was illegal, and punishable, for Corporate officers to engage in bribery abroad. How much has changed since the 1960′s. American Corporations and their Lawyers raced to the bottom of legal jurisdiction: *banana republic* states we helped to create, flourishing for *some* through institutionalized organized crime.

          At least some of us remember how it used to be, hence seek to re-create the NON-criminogenic environment that produces fraud and graft on steroids.

          1. LeonovaBalletRusse

            Sorry. “the NON-criminogenic environment.” It is the *criminogenic* environment we have now that produces fraud and graft on steroids.

            Bill Black, Yves Smith, Glenn Greenwald, Bruce Fein, Ralph Nader are DARING to call a spade a spade. They are “good people doing something.”

      3. Alright Jack

        Did the Nike boycotts in the 90s lead to the end of sweatshops better working conditions in shoe manufacturing? Nope, in particular the life’s of thousands may have improved due to pressure from Nike and other brand-dependent companies, but not overall. These companies will only push for improvements for as far as their cost-benefit analysis will show it as beneficial (and surely most money will go to marketing in order to show how green and social they now are anyways).

        I am not opposed to an Apple boycott. I never bought anything from it and I hate the company (but for other reasons; iTunes/AppStore monopoly, anti-openness etc). But it might help out thousands of workers and who am I to stop that? It will however never lead to the necessary improvements to the broader industries. Even in hardware there are plenty of no-name manufacturers out there that overall employ much and much more people than Apple does. As if HP/Asus/Lenovo/Samsung and all the others do it any better than Apple, they just tend to make less profit….

        There is a corporate-driven ‘race-to-the-top’ narrative out there arguing that increased consumer awareness will humanize capitalism, but I hope you don’t believe in that right? It is purely utopian (and greenwash).

        And of course nobody needs smartphones, but people won’t give up on them. Not even on buying every new stupid Apple iteration of 4 g s n or whatever. Rather than boycotts, I think it is much more productive to pressure the governments and institutions that allow the Foxconns to operate as they do. Push for an alternative globalization, make people aware of the ways the WTO, IMF and WB have been setting up the rules the last 30 years. And how that can be changed. If you truly want to change things, then this is the way.

        1. different clue

          Focused directed pressure from an organized movement can work better than unfocused random pressures from disconnected individuals. But movements don’t often spontaneously arise from the primordial ooze of random individuals. First some like-minded individuals have to find eachother and evolve a visible culture devoted to what they want to see. Then they try recruiting others and growing their culture which can be a grow-bed for growing a movement.

          So a community of “individual responsitarians” all individually “walking some kind of walk” can find eachother and then recruit others and impress onlookers who always ask: “well…what are YOU doing about that in YOUR life?” Eventually the culture of targetted boycott might be able to grow a movement of targeted pressure able to extort some beneficial system-changes out of the Enemy Occupation Establishment.

  3. MichaelC

    Mr Black,

    I think the most effective way to to get answers the questions about what needs to be done is to first broadcast a very simple to understand number.

    According to the NYTimes, it would cost Apple $65 per unit to close the wage disparity between chinese and western works.

    Some simple number crunching reveals that 12+ ($65xunits sold) billion of Apple’s 14+ billion in profit would be eliminated if this gap was closed.

    In other words the lions share of Apples profitability can be directly attributable to the wage gap. In other other words, Apple is really not a terribly profitable company absent the exploitation premium.

    So when Jobs told O that these jobs were never coming back, the implication was clear. Apple will never be profitable enough were it to set up shop back home. It’s not the lack of US engineers that is the problem, or unfavorable tax treatment in the US.It’s the illegality of slave labor in the US that is the impediment.

    Surely Obama and every other gov’t official understands this very clearly. It’s time Apple product consumers understood what extras they are buying in addition to their gadget.

    1. Roger Bigod

      I’ve seen a different figure suggesting that a billion out of Apples profits would hugely improve the position of the workers. Assuming it filtered down to them.

      And if the NYT estimate does this to Apple, similar assumptions applied to its competitors would suggest that they have little hope of profits. So boycotting Apple alone is essentially subsidizing makers of gear that isn’t your first choice because Apple made more off the abuses.

      It may be that Cook and the other Apple execs ignored the failed audits partly because they didn’t want the hassle of taking on Foxcomm and the Chinese authorities. It’s not unlike the situation of the big banks before the financial crisis. A whistle-blower was asking for trouble as well as forgoing profits. Doubtless the latter reason carried more weight.

      The best case I can make for boycotting Apple is that they’re the most conspicuous example, and so the best whipping boy for calling attention to the problem. But it’s a poor substitute for good regulation.

      1. LucyLulu

        “It may be that Cook and the other Apple execs ignored the failed audits partly because they didn’t want the hassle of taking on Foxcomm and the Chinese authorities.”

        Perhaps. However I would propose that the profit factor was by far the more important motivation. Why would Jobs/Apple want to shoot themselves in the foot by taking on the Chinese infrastructure? One would also think that Apple has the market share to simply threaten to move their business elsewhere if conditions don’t improve. Money = power….. whether in the US, China, or any other nation.

    2. James

      And you seriously think point of sale 1st world consumers give one rat’s ass about ethereal labor conditions in China vs price points for products in the here and now? Thank you in advance for buying into the corporate marketing meme. May we call you tomorrow to sell you another?

      1. LucyLulu

        Unfortunately, I agree. Has it always been this way? Or was there a time when a scandal like this would have resulted in mass social outcry against Apple and similar operations? Did a sense of shame used to accompany corporate executives who were identified as participating in exploitative, much less fraudulent or blatantly criminal, behavior? Hell, Steve Jobs is heralded as an icon of a “free market capitalist” economy. Every J6P can dream of being the one who replicates his success.

        Karl Denninger, on Market Ticker, noted that Dennis Ritchie died the same week as Steve Jobs, but received minimal attention. Ritchie’s contributions included developing the C programming language and the Unix operating system, both of which in turn became the platform for the development of the Internet. Ritchie was a well-liked, humble individual who spent his life working in research and academia. It could easily be argued that his contributions were far more valuable than the iPhone or iPad or even Mac computer (none of which Jobs developed, he did the marketing). If our economy rewards individuals on a merit-based system, why was Jobs rewarded exponentially more than Ritchie?

      2. LeonovaBalletRusse

        James, it is the *tragic flaw* of Americans that they *shop price* compulsively. I saw this when I was in sales. That’s why the masses were suckers for the *Wal-Mart* experience, cutting out the *middleman*, devil take the hindmost.

        Americans are addicted to MORE for less.

    3. Blissex

      «According to the NYTimes, it would cost Apple $65 per unit to close the wage disparity between chinese and western works [ ... ] In other words the lions share of Apples profitability can be directly attributable to the wage gap. In other other words, Apple is really not a terribly profitable company absent the exploitation premium.»

      But is a ridiculous argument in many ways, but the main one is that «close the wage disparity between chinese and western» because giving a chinese worker the same wage as a western one would make his standard of living much, much higher than the western worker.

      Giving chinese workers a wage equivalent to that of a western workers would be far less expensive for Apple.

      What is most notable is that Apple and all the other companies manufacturing in China are profiting from the cost-of-living premium, where the price of many things in China are low because most people, not merely factory workers, have low incomes.

      An individual westerner can also enjoy the same cost-of-living premium if they go to live in a low-cost place, and indeed many do.

      Eventually the big issue is that the doubling of the global pool of workers has happened mostly in low-cost countries with a highly developer sector.

      USA workers are not competing on price with most Chinese workers to make plastic toys and t-shirts, the USA lost those jobs to Japan, Taiwan, Singapore long ago; and USA workers are not competing on price with German workers to make machine tools and automated devices, because the German workers are paid the same or more.

      The real problem is that USA workers are competing with a minority of Chinese workers to make medium and high tech products, and that minority of Chinese workers have a cost of living that is 10 times lower than the USA workers, and that’s what USA companies are taking advantage of (plus also relatively, not merely absolutely, lower wages).

      That and the unlimited cost-free funding that the USA financial system and the Chinese provide them to ensure that all unionized jobs in the USA are destroyed.

  4. LeonovaBalletRusse

    The hot *hooks* for Apple customers were: excellent software and *sexy* hardware; the *gated community* experience for perceived *winners* in the *cool/sexy* gadget contest; the through-system ready transferability of data from device to device; and the relative lack of hacking incidents into Apple systems. The ready use of Microsoft programs for Apple boosted Apple use considerably. Apple Marketing *suspense* scenarios were pure genius.

    Steve Jobs’ maniacal perfectionism at the expense of Chinese slaves was ruthless beyond measure. His fraud to achieve his *reputation for excellence* compounded this crime against humanity. Now we KNOW: He blew it.

  5. Fiver

    Good to see this issue discussed, Yves.

    I had a lengthy comment all set to post when my computer blew out on me late last night. Post went to where all Posts go to die.

    This grotesque multinational model and its even more grotesque labour and environmental arbitrage profits have skewed the entire development of the global economy. No Walmart. No Apple, nor most of its competitors. No insane global supply chain. No crushing of Southern Europe or blue collar America. No utterly unsustainable Chinese bubble. No global race to the bottom.

    The First World needed to meet the Third World far more than half way in terms of share and distribution of global wealth. This was entirely do-able in a thoughtful, equitable, and sustainable manner. What happened instead was to create wildly lopsided outcomes everywhere, while putting everyone at much, much greater risk than the prior, far less integrated global regime.

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